Thursday, September 3, 2009

I have received a copy of the lease between the Spence Foundation and the Trial Lawyers College, together with the college's amended bylaws, minutes of board meetings, and a list of contributors to the college current as of June 2, 2009. At least I think that is what the documents are: They arrived with a note urging me to press on in an envelope from a midwestern state. The documents are consistent with what I have been told by several sources in a position to have personal knowledge about the college's doings.

1. Was The Lease Lawfully Approved By The Board Of The Trial Lawyers College?

Article Three of the Bylaws requires "the presence of not less than two-thirds of the [board's] members ... to conduct the business of this organization." Members may attend a meeting in person or by telephone. There is no provision for proxies or absentee participation.

The lease between the entities was approval at a special meeting of the board conducted by telephone on September 7, 2005. The following board members were present by telephone: Gerry Spence, Bill Trine, Jude Basile, Rex Parris, John Zelbst and Kent Spence. The minutes are cryptic about Milton Grimes, noting that he "joined the conference call and participated later in the conference." Jim Nugent was not present, but sent an email with his comments and input.The following board members were not present: Cyndy Short, Rafe Foreman, Fredilyn Sison, Kaitlin Lairmer and Jim Nugent.

By my reckoning, that makes a total of 12 board members. Giving the benefit of the doubt to the board and counting Grimes as present, that means seven board members were at the meeting. That's one short of a quorum so let's toss in Nugent for the requisite eight.

When time came to vote, however, Gerry Spence, Kent Spence and Jude Basile abstained, presumably because they were also on the board of the Spence Foundation. Thus, although the three abstainers were physically present at the meeting, they were not voting. Only four members, Trine, Parris, Zelbst, and, arguably, Grimes voted "unanimously" in favor of signing the lease; make it five if we include Nugent, although it is not clear he cast a vote. That is a mite over one-third of the board, or about one-half of the two-thirds required. Query: Is the lease really valid, signed, as it was, by a mere rump of the board?

II. The Lease Itself

Paragraph 3 of the lease agreement requires the college to pay the foundation rent. "The Rent shall be equal to LANDLORD's actual cost of ownership of the Leased Premises, which shall include property taxes, insurance, maintenance, utilities, and all other costs including costs of employee wages necessary for the operation of the Trial Lawyers College and its attendees." This rent shall not increase more that five percent per year. Rents are to be sent to the Spence Foundation at a P.O. Box in Jackson. The address reads: "ATTN. Gerry L. Spence."

The term of the lease is for 25 years. However, "[t]his Lease Agreement shall automatically terminate upon the TENANT ceasing to conduct its operations in compliance with its Mission Statement, ..." That mission statement requires education and training of lawyers and judges "who are committed to the jury system and to representing and obtaining justice for individuals; ..." The Landlord may terminate the lease if the tenant fails to pay sums due within 90 days. "Additionally, LANDLORD may terminate this lease upon thirty days written notice if TENANT, in Landlord's sole and absolute discretion after input from the Tenant, fails to operate the Trial Lawyers College in accordance with the Mission Statement."

The person who sent me this package claims to be a former contributor troubled by what he or she believes to be misrepresentations about the status of the college. I was given a two page list of contributors. There are fifty names on the list; they have given sums ranging from a high of $205,250 to a low of $20.7444.94. Many board members are on this list, but not most; six donors were either present at the board meeting approving the lease or were closely associated with those present. The total sum given by all 50 donors is $2.4 million.

I suspect that so long as the Spence Foundation believes that the Trial Lawyers College is following its mission, these gifts will go to their intended purpose. But it seems troubling that the Spence Foundation can exercise "sole and absolute discretion" on revocation of the lease. The instrument does not even give the college or its contributors access to binding arbitration.

It strikes me as an overstatement to claim that the ranch has been given to the college. The documents I have been given support my conclusion. What's more, it is an open question whether an actual quorum of the board even approved the lease. Perhaps its time for a new vote, and a new lease; one which protects folks giving tens of thousands of dollars to an entity that is not only here today, but which will be here tomorrow. And one which gives both parties access to a neutral fact-finder on a claim of breach.

Better yet, why not just give the property to the college? That is what folks have been told all along, isn't it? What need does the Spence Foundation serve ?